The average independent owner-operator’s net income dropped in 2019 from 2018, but it still did not fall to 2017 levels.
That’s the summary of last year’s personal finances for owner-operators, provided by Todd Amen, president of ATBS. The firm specializes in providing financial assistance and advice to owner-operators, including tax preparation. Through that tax work, Amen gets a close-up look at how drivers are performing.
Amen made his comments on “Drilling Deep,” a podcast that is part of the FreightCast family of podcasts from FreightWaves.
Amen said the average driver last year, based on what he’s seen so far, made $63,000 net. That is down from the $65,000 they made in the historically strong freight year of 2018 but still higher than the level of 2017. Amen said average net income that year was $60,000.
“It was not a terrible year,” Amen said of 2019 on “Drilling Deep.” “They gave up a big part of what they gained in 2018 but not all of it. You can say that the gain from 2017 to 2019 was cut in half.”
And speaking of halves, the two halves of 2019 differed significantly, Amen said. Average net income in the first half of the year was down about $600 from the prior year’s first half. But in the second half, Amen said, the drop was about $1,400.
Not all drivers are the same, and Amen said ATBS coached a lot of drivers going into 2019 that “it was going to be a more difficult year.” “Those that made some changes, they actually did just fine,” Amen said. “They had an OK year.”
Some of those changes played out in unexpected ways. For example, even though the rates were lower, there was less of a mad dash to drive as many miles as possible to make up the difference. In fact, Amen said, “we saw the lowest recorded miles in our 20 years in business.”
The drop in rates led a lot of drivers that were more carefully managing their business to accept loads “that they wouldn’t have done the year before, but realizing it might get [them] into a decent-paying lane with better freight.”
In 2018, “rates were so high we forgot about the cost side of the business,” Amen added. The whole focus was “how do I get the next load … the fastest?”
One of those changes Amen saw: slower speeds. Average miles per gallon improved from 2018, he said. “They paid attention to fuel economy and they got better miles per gallon.”
Drivers may ramp it up this year, however, Amen told the podcast. “I think 2020 is going to be a year when drivers will want to get out and run more,” he said. “And they’ll take some loads that maybe they weren’t going to do a year before.” They could be “choosy” last year but will soon face the reality “when their bank accounts are not what they want them to be, and they’ll probably run a few more miles this year.”
A huge factor in the market was the cost of insurance. Independent owner-operators were paying $3,000 to $5,000 for liability insurance back in 2016 or 2017, Amen said. “That cost went up easily to $12,000 last year,” he added.
“It was a huge hit and it actually knocked a few people out of the market,” Amen said. “They went back to running for a fleet because they couldn’t afford to handle that on their own. It has become a really big barrier to entry to doing business.”
The market is sending out other signals that driving on a lease is currently preferable. Leased miles today are paying about $1.50 per mile while the spot market is hovering near $1.35. Throwing in all the other costs, “it does not pay for me to do my own authority and run the open market,” Amen said. “I’m better off where the contracted freight is.”
The drop in rates last year and the increase in insurance costs did take a toll on capacity, Amen said. He put independent owner-operators at 10% of the entire trucking fleet, and independents who took themselves out of the business totaled 4,000 to 5,000 trucks, or about 3.5% of capacity.
But in 2018, when rates were strong, the market probably added about 10,000 trucks. “Overall, my guess is we didn’t completely remove what was added in 2018 but we are headed in that direction,” Amen said.
He still has optimism for the sector. “I believe that anybody that is smart enough, capable enough and willing to work hard can always make money as an owner-operator,” he told “Drilling Deep.”
